The financial sector has welcomed David Murray's draft report, which does not rock the boat too much.

It is no more than most would have expected from an inquiry led by the former chief executive of Australia's biggest bank.

"My feeling is that it's a steady-as-you-go sort of report, rather than being that radical ... this is a relatively mainstream, stable, secure view," commented Martin North, a banking analyst who runs his own consultancy Digital Finance Analytics.

Not that the report gives carte blanche to the major banks to continue dominating the market as they have in recent years, especially since the global financial crisis.

"Reading between the lines, what he's saying is that financial stability has essentially been the number one priority for the regulators in Australia and, as a result of that, they've been able to perhaps allow more consolidation in the industry than might otherwise be the case," Mr North added.

Mr Murray and his expert panel have expressly shied away from offering recommendations at this early stage.

CLSA banking analyst Brian Johnson says some of those ideas show that Mr Murray is far from captured by the major banks, despite his background, and is the right person for the task.

"If you really had thought that he was [acting as] an ex-CEO of a major bank we wouldn't be talking about potential reforms of risk weightings for regional banks," he told ABC News Online.

What Mr Johnson is referring to is an idea from the inquiry that the amount of capital that regional banks, credit unions and building societies need to hold in relation to mortgages be reduced to bring it more in line with the big four - that would reduce their costs and allow them to better compete on the price of loan products.

Martin North agrees that it is a good idea for smaller institutions to be on a level playing field, but worries that lowering the amount of reserves banks need to hold to cover mortgage losses could encourage more, and riskier, home lending.

"I think we should be careful because at the moment there is not a problem with the supply of mortgages into the marketplace and in fact we've probably got an oversupply of mortgages looking at the market, and that's one of the reasons why house prices have been running away," he warned.

Mixed reactions from industry, consumers

Perhaps in a reflection of how many different options were canvassed in the report, with few preferences expressed by its authors, reaction to it was generally a muted welcoming.

The Customer Owned Banking Association (COBA), which represents credit unions, building societies and mutual banks, says it welcomes aspects of the report but says other parts are contradictory.

"The FSI [Financial System Inquiry] interim report's finding that the banking market is 'competitive' is contradicted by its other findings that regulatory capital requirements are not competitively neutral and that the 'too big to fail' problem has become entrenched," COBA's chief executive Louise Petschler said.

The Consumer Action Law Centre was more positive about the report, and its chief executive Gerard Brody welcomes its focus on "fairness" in the financial system.

"There are a number of business models that, through their marketing, sales techniques, contract terms and customer service, appear to be designed to exploit consumer vulnerabilities, such as having a low income or experiencing financial troubles," he said.

"A single prohibition to outlaw unfair trading would respond to the Murray inquiry's finding that the financial system should promote fairness and efficiency."

The Financial Services Council, which represents funds managers including for-profit superannuation funds, welcomed the report's recommendation about avoiding further major changes to the super system.

"Consumers need certainty and stability in policy settings to have trust and confidence in the system," said its chief executive John Brogden.

The superannuation sector, however, also came in for some strong criticism in the draft report, which found that fees and costs were too high compared with international benchmarks.

"The MySuper system, although less than 12 months old, has already seen a reduction in superannuation fees. As the FSI report suggests, MySuper needs more time to demonstrate that it can deliver on its objectives," Mr Brogden responded.

Law firm Minter Ellison's specialist financial services partner Richard Batten says the overall tone of the report is positive, and incremental change rather than radical reform is the way to go.

"In the main, those changes aim to facilitate the operation of and improve access to our financial system rather than radically transform it," he observed.

"Importantly, the inquiry has concluded that the banking system is generally competitive, although it identifies some areas where regulation may be impeding competition or may need to change to reduce the moral hazard of institutions that are perceived to be 'too big to fail'."